Women and money

The traditional paradigm of women taking care of homes and men taking care of money has changed over the last few decades with increasing participation of women in the workforce. In the early 50s, the percentage of working women in urban female population was around 12% and it rose to around 16% in 2018-19 (source: NSSO). While the growth in percentage terms may seem modest, if we take into account the population growth over the last 7 decades, then it will be evident that many more women are working today compared to previous generations. Even among women who do not have formal employment e.g. homemakers, there is increasing involvement of women in personal finances of the household. This is a very encouraging development for the well being of the families and our society as whole. However, we still have a long way to go as far as women involvement in investments and personal finances are concerned.

Misconceptions about women and money

• The perception that women are bigger spenders than men is wrong. Women usually make smaller ticket purchases, while men tend to make big ticket purchases e.g. property, cars etc.


• The perception that men are more fiscally responsible than women is also incorrect. It has been seen that men are likely to take on more debt compared to women (source: bankrate.com, November 2022).


• Many men consider themselves to be better money savers than women. However, their perception is usually wrong. Women usually suffer more from a sense of insecurity than men and therefore, tend to save more than men across different income groups. Also, women feel more responsible towards their children and are ready to make sacrifices for the sake of their children’s future. A survey conducted by Bank of Baroda, shows that average balances of women in Jan Dhan Yojana is more than average balances of men (source: Times of India, August 2021).


• There is a perception that men are better investors than women. Studies in the US have shown men are likely to take more risks than women; women are more conservative. Women usually think more long term, whereas men tend to trade more (short term). Trading is risky and can harm your financial interests (source: Motley Fool, March 2023).


• Women are not interested in investing. This is not entirely true. While in India, many women leave investment decisions to their spouses or fathers, women are equally concerned, if not more, about the family’s financial security and life-stage financial goals. With societal changes taking place in India e.g. shift from joint to nuclear families, women choosing to remain single, greater career growth opportunities for women, more and more women are seeking financial independence. Since the COVID-19 pandemic women are saving and investing more than men (source: Outlook India, November 2022).

‘For Her’ is India’s first women oriented financial education and awareness program by Aditya Birla Sun Life Mutual Fund.

Aditya Birla Sun Life Mutual Fund is on a mission to lead every woman in the country towards attaining financial independence.

Common mistake made by women in relation with money and investments

• Start investing late. Women often want to settle down in their careers or lives before they start investing. While many men may also want to do the same, women usually start their investment journey later e.g. when kids start going to school. This delay results in opportunity lost. The earlier you start investing, the more wealth you can create through the power of compounding. Compounding is profits earned on profits; the longer your investment tenure, higher is the power of compounding (see the chart below).
  
  



• Not take sufficient risks. You should always remember that risk and return are directly related. Higher the risk, higher the potential return over sufficiently long investment tenure. Since the sense of insecurity is higher in women, they usually tend to avoid risks. Too much risk aversion may harm your long term financial goals. Historical data over the last two decades have shown that risk-free returns (e.g. Bank FD interest) have failed to beat inflation on a post tax basis. You should take the right amount of risk, based on your risk capacity and financial goals. You should understand that your risk capacity (ability to take risks) is different from risk tolerance (your attitude towards risk). You should consult with a financial advisor, if you want to help in understanding your risk appetite.


• Make compromises to balance priorities. Women have to balance many priorities e.g. career, taking care of children, spouse, parents, in-laws etc. In this difficult juggling act, they may have to make compromises that harm their long term financial goals. It is important for both working women and homemakers to have a financial plan. Financial plan can help you balance multiple priorities and achieve your financial goals. Financial planning is the process of defining different goals, quantifying these goals factoring in inflation, your income and expenses. The outcome of financial planning is an investment plan to meet your financial goals factoring your constraints / priorities. Financial planning also prepares you for risks like untimely death, serious illnesses, work life interruptions like childbirth, child care, taking care of ailing relatives etc. You can take the help of a financial planner is making your financial plan.


• Afraid of making mistakes. This comes from the sense of insecurity and this often prevents women from making investment decisions or delay making investments. You should understand that do not have to be an investment expert or know everything to start investing. You can invest in mutual funds, which are managed by professional fund managers with sufficient expertise and experience, who will make investment decisions on your behalf to achieve your investment objectives over sufficiently long investment horizons. There are different types of mutual funds for different investment needs and risk appetites.

Embrace equity for your long term financial goals and wealth creation

#EmbraceEquity is the theme for the international women's day, 2023 (March 8 2023) where the world celebrates the achievements of women, raises awareness of diversity and collectively forge women’s equality and gender parity.

Similarly, when it comes to the investing world, #Embrace Equity can urge women to celebrate their inherent strengths in investing, raise their awareness of available investment options and create wealth over the long term.

Equity is an asset class, referring to shares of companies which trade in stock exchanges. Many women may think of equities as very risky investments. While equities are volatile, historical data shows that equity as an asset class has the highest wealth creation potential over long investment horizons. The chart below shows the growth of Rs 1 lakh invest in Nifty 50 TRI (the leading equity market benchmark index) over the last 20 years (as on 28th February 2023). Your investment would have multiplied more than 20 times in the last 20 years at a CAGR of 16.6%. Equity as an asset class is suitable for your long term financial goals like children’s education, children’s marriage, retirement planning, wealth creation etc.

Source: National Stock Exchange, Advisorkhoj Research. Period: 01.03.2003 to 28.02.2023. Disclaimer: Past performance may or may not be sustained in the future

How to start investing for your long term financial security and aspirations?

• Start with defining the financial goals for you and your family in quantifiable terms. You should factor inflation in your financial goals. You can take the help of a financial planner if you need help in setting your goals


• Prepare an expense budget for you / your family. List down the essential expenses e.g. food, rent / EMI, utilities, fuel / transportation, school fees etc. Keep aside some money for your discretionary spending but be judicious about; lower your discretionary spending, higher your savings. Save the rest.


• It is not enough to save, you should invest your savings to get returns and create wealth for your long term financial goals.


• Start investing from your regular savings through mutual fund systematic investment plan (SIP). Through SIP, you can invest fixed amounts every month (or any other interval). You can invest over long investment tenures and benefit from the power of compounding. The chart below shows the wealth creation through a monthly SIP of Rs 10,000 in Nifty 50 TRI over the last 20 years. With a cumulative investment of just Rs 24 lakhs over 20 years, you could have accumulated a corpus of nearly Rs 1.1 crores. You can see the wealth creation potential of SIP over long investment horizon.
  
  

  Source: National Stock Exchange, Advisorkhoj Research. Period: 01.03.2003 to 28.02.2023. Disclaimer: Past performance may or may not be sustained in the future



• You should consult with your financial advisor to discuss which mutual fund is suitable for your investment needs and start investing.

Disclaimer: An Investor education and Awareness initiative of Aditya Birla Sun Life Mutual Fund.

All investors have to go through a one-time KYC (Know Your Customer) process. Investors to invest only with SEBI registered Mutual Funds. For further information on KYC, list of SEBI registered Mutual Funds and redressal of complaints including details about SEBI SCORES portal, visit link https://mutualfund.adityabirlacapital.com/Investor-Education/education/kyc-and-redressal for further details.